[Proposal] Kryptonim - Intent to deploy Liquidity Line of Credit

Proposals
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[Proposal] Kryptonim - Intent to deploy Liquidity Line of Credit

Introduction

Kryptonim is a fiat onramp provider that offers end-users the ability to effortlessly exchange fiat for cryptocurrency. The platform operates on two primary models:

  • B2C: Direct consumers can purchase stablecoins on Kryptonim, which they can then spend or transfer to their preferred wallets.
  • B2B2C: Merchants and/or Wallets, keen on widening their acceptance criteria, can integrate Kryptonim’s solution to allow their customers to transact with stablecoins in a seamless manner.

Kryptonim is a fiat bridge linking end-users to a robust network of payment acquirers and gateways. Much like the relationship between online merchants and their payment partners, this dynamic amplifies the effectiveness and reliability of our services. We’ve established a sturdy infrastructure that engages multiple payment acquirers and gateways, guaranteeing redundancy and enhanced approval rates.

Our platform melds together the crucial aspects of Know Your Customer (KYC) protocols, risk management, varied payment avenues, and formidable crypto liquidity; this combination of features paves the way for a smooth and efficient checkout experience.

The Liquidity Challenge and Opportunity for Lenders:

The need for capital results from the liquidity gap that Kryptonim encounters due to the t+3 settlement lag when users (or merchants’ customers) purchase stablecoins. The borrowed capital will serve as a financial bridge to manage this gap. By leveraging these funds, Kryptonim guarantees uninterrupted operations for users and sets the stage for consistent business expansion.

Kryptonim, in its strategic efforts to sustain growth and smooth operations, is actively seeking to secure a loan of 10 million USD. Lenders collaborating in this initiative, will receive yield based on the curve defined by the Line of Credit parameters. Yield for lenders comes from users paying fees to use Kryptonim.

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Kryptonim’s Line of Credit Parameters

Interest Curve

Below image is a preliminary configuration of how the interest curve would be on a deployed product.

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Other parameters

Max size: $10M

Deposit Restrictions: Kryptonim’s managed whitelist

About us: Kryptonim as a Straal project

Kryptonim, an innovative venture developed by Straal, a prominent provider of intelligent payment and fraud prevention solutions (https://straal.com/), signifies a significant step towards mainstream cryptocurrency integration. By seamlessly incorporating Kryptonim, Straal effectively dismantles the barriers that often hinder entry into the cryptocurrency realm, thereby fostering wider acceptance among the general public. This strategic integration is pivotal in forging a strong connection between traditional financial systems and the burgeoning web3 ecosystem.

As a strategic web3 initiative conceived by Straal, Kryptonim derives substantial advantages from Straal’s well-established position as a regulated payment institution sanctioned by the UK’s Financial Conduct Authority (FCA). This regulatory endorsement adds a layer of credibility and trust to Kryptonim, instilling confidence among users and stakeholders. The fusion of Straal’s payment expertise and Kryptonim’s visionary approach paves the way for a more accessible and user-friendly cryptocurrency gateway.

Straal’s extensive track record spanning over seven years in the payment industry is a testament to their proficiency and industry know-how. With a dedicated team of 50 payment specialists, Straal has consistently pushed the boundaries of payment technology, ensuring that businesses and consumers benefit from secure and seamless transactions. This wealth of experience, combined with Kryptonim’s trailblazing framework, positions Straal at the forefront of the evolving financial landscape, driving the adoption of cryptocurrencies and shaping the future of digital transactions.

Kryptonim requests to be whitelisted as creator and borrower for Automated Lines of Credit on TrueFi using address: 0x05B609675bA7D79A2249675A4821d4184Eec4B35

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Welcome aboard! The proposal from Kryptonim feels like a refreshing initiative. Here are some notable aspects I’ve noticed:

  • This is the first attempt to pioneer Line of Credit Protocol, created by TrueFi DAO!
  • Robust Foundations: The established arrangements with payment partners present a strong foundation. The support from Straal and the UK’s FCA further bolsters confidence.
  • Liquidity Solution: The innovative line of credit to address the liquidity gap is commendable. It potentially provides lenders with a superior yield compared to other DEFI ventures.
  • Transparent Yield Source : The way the yield generation is tied to user fees is straightforward. This clear pathway for yield is a big thumbs up for credibility and sustainability!
  • Kryptonim bringing own lenders to the table is a great way to jumpstart this offering and a way to build trust with lenders.

This proposal is praiseworthy for its potential to streamline the fiat-crypto interaction significantly. Eager to witness the collective response and the evolution of this initiative!

To All TrueFI DAO Members, what are your thoughts?

Your engagement in this discussion is highly encouraged.

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@Kryptonim ,

It’s great to see this proposal come across as it showcases TrueFi’s ability to lower the cost of capital and solve real world problems for financial institutions, most of which have a settlement lag when transacting. This model may be highly extensible to other areas of finance.

We would like to go deeper into the structure and recourse itself (is this secured by assets or is this an unsecured loan to Kryptonim?) but think this is a great first step towards offering a higher yielding product without excessive counterparty risk (if secured).

One question I have is whether Kryptonim will be able to sustain an 85% utilization of this pool and, if so, what financing was being used for this function prior to the vault? I am assuming that this is not a new capability for Kryptonim but rather a core piece of the mechanics that is being placed on-chain.

One other question - will this loan be callable by the DAO or will it remain outstanding indefinitely?

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Thanks for the proposal! Kryptonim’s innovative approach, backed by Straal’s established reputation, exemplifies the future-forward thinking that is vital for bridging traditional finance with the evolving digital landscape.

As I dive into the details, a few areas caught my attention, and I’d love some clarification:

  1. What are the proposed interest rates at 100% utilization?
  2. I see a depositor restriction - will Kryptonim be bringing in an established array of depositors?
  3. What kind of businesses will Kryptonim be servicing?
  4. Given the current interest rate climate, is a base 8% APY high enough?
  5. To improve TrueFi, could you please share why Kryptonim chose TrueFi?

Finally, I like the relation to Straal - since crypto is nearly impossible to recover after it’s been sent, accepting credit cards can be risky when it comes to fraud.

I’m enthusiastic about the potential of this collaboration and would be grateful for insights on these aspects. Your clarifications will help us make a more informed decision and deepen our understanding of the strategic alignment between Kryptonim and TrueFi.

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@adapt3r Thank you for your questions! Please find the answers below.

1. Is this secured by assets or is this an unsecured loan to Kryptonim?
Our proposal concerns an unsecured loan to Kryptonim.

2. Will Kryptonim be able to sustain an 85% utilization of this pool and, if so, what financing was being used for this function prior to the vault?
We predict that the utilization of the pool will remain close to 85% with slight fluctuations in both directions. However, we cannot guarantee constant utilization as this will be dependent on current liquidity needs (depending on the traffic levels).
So far Kryptonim was able to secure liquidity on similar terms from private investors on an individual basis.

3. Will this loan be callable by the DAO or will it remain outstanding indefinitely?
We propose that the credit line will have a termination period of 1 year. After this period, Kryptonim undertakes to repay the outstanding. After this condition is met, Kryptonim can potentially open another ALOC.

Let us know if you have any further questions!

1 Like
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And one more thing as you mentioned fraud risks - as we will use Straal for card payments we will also incorporate a complementary advanced fraud prevention solution, Nethone, to the payment flow.

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@TylerEther Thank you for thoughtful questions! I hope that these answers will provide additional insight to our proposal.

1. What are the proposed interest rates at 100% utilization?

At 100% utilization our proposed interest rate would be 15%.

2. I see a depositor restriction - will Kryptonim be bringing in an established array of depositors?

As we are a regulated entity, we are obliged to verify and whitelist the entities providing funds to confirm their origin. Additionally, we are obliged to perform AML to comply with the applicable regulations.

3. What kind of businesses will Straal be servicing?

In this setup Straal will act as a payment gateway for Kryptonim, enabling card payments.

4. Given the current interest rate climate, is a base 8% APY high enough?

According to our estimates 8% APY seems to be competitive. We may revisit the offer if it turns out not to be optimal.

5. To improve TrueFi, could you please share why Kryptonim chose TrueFi?

We decided to approach TrueFi with this proposal as we want to rely on a reliable and reputable platform. TrueFi’s blockchain-based loan system aligns well with Kryptonim’s focus on leveraging cryptocurrency solutions to provide improved services to its users.

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Can you share whats in the Kryptonim pipeline?

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@StrategoHoldings, thank you for this question.

While we aim for transparency in public forums, certain business-sensitive information can only be shared directly with potential lenders who are willing to undergo the appropriate vetting process upon their request.

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Tally vote for this proposal tentatively scheduled for 10/9/23.

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Some advice if i may.

Keep all your socials and Github active and up to date. Its 2023 and having a strong social presence builds trust with a brand.

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What concerns me about this proposal is the information and incentive asymmetry.

Kryptonim has a much better view as to where utilization will be and have proposed a curve whereby the rate is a function of said utilization.

What is stopping Kryptonim from promising 85% utilization knowing it will be more like 25-50%? End result: they get a loan at sub-Treasury yields and lenders are hung out to dry. I would propose that instead of being priced on this curve, there is a minimum cost to this financing regardless of utilization. That should make this more palatable.

@Kryptonim do the lenders you are bringing understand this? Seems unnecessarily unfavorable.

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@adapt3r mechanics for ALOC are different than Asset Vaults where you can have funds sitting idle offchain.

For ALOC, nothing is stopping lenders from withdrawing at utilization they don’t like. Liquid part remains available onchain all the time for lenders to redeem, causing utilization to spike if they do.

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@adapt3r Underutilization is a valid concern but I think the proposed interest rate curve mitigates this risk.

Looking at the Borrow APY, the borrower always pays at least 8%. And in times of high utilization >85%, the rate spikes to >12%.

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I hear your concern @adapt3r but I think @kaimi and @tylerw are right- ALOCs are specifically designed with this issue in mind. If rate is low, that would be because utilization is low, in which case lenders can make the easy decision to withdraw their liquidity. This should (hopefully) find an equilibrium rate where both lenders and @Kryptonim are happy.

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Ah understood @rafaelcosman @tylerw . I misunderstood the curve and open-ended nature of the vault. With that in mind I think this makes a lot of sense.

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As this is our first interaction with onchain governance, we kindly ask for community assistance to put this proposal on Tally on our behalf.

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You can find the proposal here. The voting is starting in 2 days on Oct 13th.

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Proposal had been re-issued. Voting starts in 2 days.

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@Kryptonim I guess the proof will be in the pudding. Congrats on the successful proposal. Its make or break time…Best of luck!